Archive for the ‘MSME’ Category

On Saturday, I did a presentation to the Jain International Trade Organization (JITO) at their Annual Growth Summit. I spoke on the topic of ‘Building Winning Team’ (presentation to be uploaded). The following was part of the talk.

While internalizing the topic, a wonderful chart depicting the ‘cycle of business’ got scribbled in the notebook, the final version of which came out as shown below. The importance of a team in a business can be visualized by looking at the chart.

The chart shows four tangible entities which are the main constituents of a business. Each constituent is in it’s own quadrant.The inbound arrow depicts movement or utilization of a resource. As owner/CEO, you create the business. The Team which you hire creates the product or service. This is consumed by a Customer which brings Money to the business. The Money in turn funds the Team. If the Team is weak or inefficient it would impact the product or service. Even more, an incompetent team may consume the money unwisely thus hampering the overall cycle of the business. Though the business revolves around the presence of the Owner/Founder/CEO, the continuum of the business is maintained by the efficiency of the team.

The upper right quadrant is the most important one — more than customers, if you build a great team, great products would come out with efficient use of capital. So, build a great team, manage them well and sometime later you probably don’t need to “actively manage” the business no more.

These are the businesses who have been using a desktop/PC for the last so many years and may have been using 1 or many windows-based applications for accounting, billing, point-of-sale automation, connecting to branch-office over private network, etc.

There is a impending run up in the growth numbers of the SMB sector in India. In the concluded budget speech, the Finance Minister doled out sops for the fledgling sector including the government’s plan to purchase Rs. 1,60,000 crore worth goods from SMBs in 2010-11, which is 400% up from the last year’s paltry Rs. 40,000 crore. Comparing this to the developed nations the number is less than 10% of all the purchases and the balance lies in the favor of large enterprises. Due to the growth in this sector, the SMBs share in the India’s GDP is pegged at 10% in the closed financial year.

Based on research estimates, the overall IT spend is being pegged at USD $4.5 billion of which IT security spend would be at $450 million (Rs. 1900 crore); 10% of the overall IT budget. The Indian IT security spend was around Rs. 210 crore in 2006-07 and would surge to a healthy Rs. 1900 crore as stated above. The gut feel is that the spend would be higher than 10% of the overall IT budget due to investments in fundamental infrastructure, consulting, software etc. for the first time.

From a textile unit in Tirupur, to a manufacturer of automotive accessory in Jamshedpur, to a mini-steel plant in Jharkhand clocking Rs. 5 crore in annual sales; in five years from now, there’ll be easily 20 million businesses that will be using IT as part of their every day life. This all seems to come together.

Sensing the opportunity – IBM, Microsoft, Sun and even desi stalwarts like TCS, Wipro have started focusing on the young but growing segment. IBM predicts that 30% of it’s revenue would be from Indian SMB segment in the next 5 years.

I think the opportunities to innovate & produce products which can be efficiently priced is huge & can be summarized as:

It can be argued that a lot of work has been done and the market is mature with products from established companies. However, these products are not suited for small business who is just starting out with it’s IT presence. Apart from the pricing which is ill-suited, the overall total cost of ownership is very high, considering that the businesses aren’t IT savvy. More than that, a lot of them have a feature load due to maturity of their life-cycles.

There are only a handful of startups in Indian segment who are working on products related to IT security, and this is a green field as I see.